You are very serious about starting your own business. You have a long list of possible ideas, but do not know where to start from and which idea to pick! Let us look at five filters that will help you zero down to that one big idea- the answer to your dreams:
Filter 1: Problem / Solution
In most cases, a new business idea is an answer to a problem. E.g. iTunes helped the music lover to pay for only those tracks they wanted, rather than buy an entire album. Another good example is Southwest Airlines, which made the otherwise expensive airline travel, affordable. Many busy professionals like cooking gourmet food, but don’t have the time to research recipes and shop for ingredients. Plated provided them everything they needed to cook at home.
Filter 2: The Product
The second thing to look at is, what is the product being offered. iTunes offers where you can sample the music, buy instantly without having to go to a store. Southwest Airlinesoffers based on a new operating model, flying 300-500 miles, with a touch of fun. Googleis having a vast array of knowledge, which becomes the first choice for people to look up information. When people do a search, an ad for related products also appears. This increases the odds that the ad is relevant and that they will click on the link.
Filter 3: Who Is Your Customer?
You will learn to define in greater depth who your customer is in a later chapter. For now, start by thinking about the following questions:
- Who is your customer? (Their demographics such as age, sex, education, income, etc.)
- Why will they buy your product?
- Can you visualize them? Develop an Avatar.
Let’s imagine how Plated thought of its customers:
Their slogan is “Eating Well Made Easy.” The customers have to be working Millennials, either single or young couples, who eat out quite often and have an income of $75,000-200,000.
They also like to dabble in cooking interesting recipes and enjoy having meals at home from time to time. Visualizing them shouldn’t take more than a quick look in the mirror for some of you.
Filter 4: Who Is The Competition? (And What Do You Do Better?)
There is always competition. Sometimes it is direct and other times it is indirect. The sub-title asks you the key question: What will you do better and how?
Google: 90% of Google’s revenues (and even more of its profits) come from selling advertising. Who is its competition? Radio, television and newspapers as a starter. While the first two have held their own to date, newspapers are hurting because they have become an inefficient medium. On the Web, many companies develop models hoping to capture ad dollars. Google reigns supreme because of their algorithms, scale and ecosphere.
Filter 5: Will You Make Money? (What Is Your Business Model?)
A Business Model is a fancy way of answering some basic financial questions, all designed to answer the last question.
- What is your selling price?
- What is your cost?
- What will your sales be in Year 1?
- How much money will you need?
- How long will it take to break-even?
Let’s see if we can understand the Business Model for iTunes / Apple: Most songs are sold for 99 cents. This is about what Apple pays to the record labels. Therefore, they make little or no money on this segment of its business. However, iTunes does help Apple sell plenty of iPods, Macs and iPhones, which make handsome profits. Their business model then, is to break even on iTunes and make their money selling hardware.
The real work will start after you have picked your first idea. We shall discuss that later.
For the more curious ones, please get a copy of Discover The Entrepreneur Within